Federal Council sets benchmarks for individual taxation

At its meeting on August 30, 2023, the Federal Council set the following benchmarks for the dispatch on the introduction of individual taxation, which Parliament had requested as part of the legislative planning:

• Individual taxation is to be introduced at all three levels of government (federal, cantonal, municipal).
• Married couples should be taxed like unmarried couples in the future and fill out two separate tax returns.
• The child deduction for direct federal tax is to be increased from CHF 6,600 to 12,000 (CHF 9,000 had been proposed in the consultation). On the other hand, based on the results of the consultation, the deduction for households with only one adult person is to be waived. There is also no special deduction for married couples with only one income, after a majority of the participants in the consultation were in favor of the variant without this deduction.
• The bill will also contain adjustments to the tax scale. For example, tax rates are to be lowered for low and medium incomes and slightly increased for very high incomes. The rate adjustments will enable the reform to have a more evenly distributed relief effect across the income brackets. Overall, the Federal Council is assuming an estimated annual revenue shortfall of around CHF 1 billion for direct federal tax for the 2024 tax year. Of this, the Confederation will bear around CHF 800 million and the cantons around CHF 200 million.

This bill will also serve as an indirect counter-proposal to the popular initiative "For individual taxation independent of civil status (tax fairness initiative)".

Based on these benchmarks, the Federal Council will prepare the dispatch on the Federal Act on Individual Taxation for the attention of parliament by March 2024. In accordance with its decision of December 2, 2022, this bill will serve as an indirect counter-proposal to the popular initiative "For individual taxation irrespective of civil status (tax fairness initiative)", which the Federal Council recommends rejecting.

The media release with further information (in particular on the effects on the burden ratios for direct federal tax) is available here.

The results report of the consultation on the Federal Law on Individual Taxation is available here.